I like the idea of having help through the year with self employment issues such as franchise tax, sales tax, property tax, expenses, deductions, etc.
Does the Self-Employment Edition help with those situations?
If so, do I need to get the Self-Employment Edition for my 2020 taxes even though I do not technically need it until 2021 taxes are due?
Or I do my 2020 taxes with Deluxe or Premiere, then start my 2021 taxes now and utilize the Self Employment Edition?
The Self Employed version would probably be the best product for your filing in 2021. However, you can start with any version this year and upgrade as needed.
A side gig can be a hobby, a seasonal endeavor or occasional work that takes up a relatively small amount of your time. The IRS considers this type of job "other income" for tax reporting purposes.
But, if you devote a substantial amount of time to it, the IRS may treat you as self-employed. If this is the case, you must file Schedule C with your tax return. Schedule C is used to report business income and expenses. Indications of self-employment are:
- Your primary purpose is to make a profit
- Your side work is regular and continuous
Cash earnings from side jobs must be reported on your tax return, even if the earnings are minimal. Under-reporting income from side work can lead to additional tax assessments and penalties. You can prevent this by reporting all income you get from your side gig, whether it's in the form of money, property or services.
Use allowable deductions to trim your tax bill
Business expenses reduce the amount of taxable income, lowering your tax bill. You can deduct certain expenses from self-employment income.
Erik Lozano is a banker by day and a rideshare driver by night in San Diego, California. He tracks the mileage on his car related to his rideshare income and deducts that portion for mileage - which includes maintenance, gas and insurance costs - at tax time.
"Having a side job gives me 'fun' money," says Erik, whose rideshare side job accounted for about 20% of his income in 2020. "Here in San Diego, it's hard to live on only one full-time job."
First, determine the difference between your expenses.
- Ordinary expenses are those that are common and accepted for your business
- Necessary expenses are those that are helpful and adequate for your business
For example, a ski teacher might deduct her ski boots as an "ordinary expense" and a landscaper might deduct rent for a storage space used to store landscaping tools and equipment. While a storage space may not be required for landscaping, it can still be deducted as a "necessary expense" because it's helpful to the business.
Common deductible expenses related to your side gig include:
- Business portion of your home
- Business mileage on your car
- Dues and subscriptions paid to business related organizations
- Necessary tools and equipment
- Tuition for related education
For example, if you earn $10,000 from a self-employment side job, and your deductible expenses total $3,000, you would owe taxes only on $7,000.
$10,000 - $3,000 = $7,000 taxable income.
With TurboTax®, we’ll ask you simple questions and fill out the right tax forms for you to maximize your tax refund.
Yes, TurboTax Self employment can handle both.
You'll need to track your income and document your expenses to determine your tax bill. Your income will be filed through Form 1040. However, you'll also need to complete and attach a Schedule C to your Form 1040 to report your business income and expenses.
To report your self employment income and expenses:
- Log in to your account.
- Select Federal from the left menu.
- Go to Wages and Income then select Income and Expenses.
- Go to Self-employment income and expenses and click start. you'll be asked some general questions about your business. After you answer them, you’ll be taken to enter your Income and Expenses.
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